In a recent update from the renowned real estate consultancy CBRE, the Industrial and Logistics (I&L) sector is poised to reach remarkable heights, projecting a five-year high in leasing activities at 36–38 million square feet (msf) across the top eight cities in India for the year 2023. This groundbreaking forecast, unveiled in CBRE’s India Market Monitor Q3 2023, sheds light on the sector’s robust performance and its pivotal role in shaping the country’s real estate landscape.

City-Wise Highlights:

The data, covering the July-September quarter, showcases Chennai as a frontrunner, recording the highest absorption at 2.1 msf. Following closely are Bangalore and Mumbai, boasting absorption figures of 1.7 msf and 1.3 msf, respectively. Together, these three cities contribute significantly, accounting for an impressive 62 per cent of the combined leasing share during this period.

Sector Breakdown:

Diving into sector-specific insights, third-party logistics (3PL) players emerge as the key players, commanding a lion’s share of 50 per cent in the total leasing activity. Engineering and manufacturing sectors follow at 13 per cent, with electronics and electrical companies making up 8 per cent.

Regional Dynamics:

Examining regional trends, domestic corporations lead the charge, claiming a substantial 59 per cent share in leasing activities. Corporations from Europe, West Asia, and Africa regions follow at 25 per cent, while Asia-Pacific corporations contribute 12 per cent. The I&L sector exhibits remarkable growth, witnessing a staggering 92 per cent year-on-year increase and a noteworthy 12 per cent quarter-on-quarter (QoQ) growth in warehouse completions during the reported quarter.

Year-to-Date Performance:

The leasing momentum in the I&L sector maintains its upward trajectory, growing by an impressive 13 per cent year-on-year (YoY) in the January-September period. The total absorption across the top eight Indian cities stands at 27.3 msf, surpassing the 24.2 msf recorded in 2022. Mumbai, Chennai, and Delhi-NCR collectively hold a robust 56 per cent share in leasing activity during this period.

Sector Dominance in 2023:

In the first nine months of the year, 3PL players continue to dominate leasing activities, securing a significant 45 per cent market share. Following closely are Engineering & Manufacturing (E&M) companies at 15 per cent, and auto and ancillary companies at 7 per cent.

Ram Chandnani, Managing Director, Advisory & Transactions Services, CBRE India, sheds light on the sector’s dynamics, stating, “The accelerated embrace of ‘multipolar’ supply chain strategies, complemented by the government’s pro-investment initiatives, continues to propel the 3PL and E&M sectors, being at the forefront of I&L absorption.”

He adds, “We also anticipate a surge of interest from FMCG, retail, and electronics & electrical sectors, driven by consumer demand.”

Anshuman Magazine, Chairman and CEO – India, South-East Asia, Middle East & Africa, CBRE, further emphasizes the sector’s growth potential, stating, “Moreover, the active participation of larger developers backed by institutional funds, contributing around 40 per cent to the completed projects, underscores the sector’s growth potential. In select micro-markets, the prospect of rising rents is bolstered by the premium commanded by new, investment-grade, technologically advanced, and strategically situated assets.”

Supply Dynamics:

CBRE data reveals that supply addition is poised to outperform expectations, projected to reach 35 – 37 msf by December 2023, driven by the completion of pent-up projects. In the initial nine months of 2023, supply addition was robustly registered at 28 msf, reflecting an impressive 57 per cent YoY increase.

Conclusion:

As CBRE forecasts this unprecedented five-year high in Industrial and Logistics Sector leasing for 2023, it presents a myriad of opportunities for businesses, investors, and stakeholders. Keeping abreast of these market trends is crucial, and CBRE, with its expertise and commitment to providing comprehensive advisory services, stands ready to assist clients in navigating the dynamic real estate landscape.

About CBRE:

CBRE Group, Inc. (NYSE: CBRE), a global leader in real estate services and investment, is dedicated to transforming real estate into a real advantage. With a presence in over 100 countries and a team of more than 100,000 professionals, CBRE is committed to delivering strategic, innovative, and sustainable solutions that help clients make informed real estate decisions.